Managing Price Complaints - Part 2

May 16, 2012
Price complaints are an unfortunate fact of life. In fact, if no one ever complains about your pricing, you are pricing too low. How you handle price complaints is important.

Price complaints are an unfortunate fact of life. In fact, if no one ever complains about your pricing, you are pricing too low. How you handle price complaints is important.

One Time Price Adjustment

Steve Miles at Jerry Kelly Air Conditioning in St Louis, MO, took a call from a customer unhappy about the price paid for a repair on an emergency service call. The price seemed fair to the homeowner at the time the service was performed, but became an outrageous sum after she talked with co-workers at the water cooler.

Steve listened to the homeowner and calmly explained that Jerry Kelly was more expensive because of the company’s training, thorough diagnostic methodology, skill level of employees, ability to respond quickly, and so on. Then, Steve shocked the homeowner.

“I’ll give you a one-time price adjustment,” he said. “You tell me what you think is a fair price and I’ll refund the difference. But from now on, if you call us, you will be aware that we offer a higher level of service for more money so there won’t be any more price adjustments.”

When the homeowner asked to be refunded roughly half the price of the service call, Steve figured he would never hear from the customer again. To his surprise, she called back in a few weeks and replaced her air conditioner and paid full price.

Today, a one-time refund is a regular policy of Jerry Kelly. Steve doesn’t advertise it and only offers it when customers complain, but it has stopped complaints, including complaints to government officials. No one has a basis to complain.

Setting Expectations

A lot of price complaints result from misplaced expectations. If the homeowner is expecting discount store prices and you are a premium service provider, it’s a recipe for problems down the road. It’s better to set correct expectations even if it costs you a few customers.

Sometimes the expectations may be off for the simple reason that homeowners have not purchased products or services from your industry in years. The homeowner remembers what things used to cost, not what they cost today.

The solution is to teach and inform the customer. Help people understand.

The Role Of Technicians

Much of the task of informing homeowners will fall to your technicians. They are the front line service providers. Yet, often technicians are fighting their own misconceptions about price. They understand what they are paid. They do not understand everything involved in running a service company. They do not understand the impact of overhead on service and think the difference between the cost of service and their pay is pure profit. You must educate your own employees about costs and pricing if you ever hope for them to educate your customers.

Educating your technicians is not enough. You must provide them with the tools they need to explain things to the customer. The use of these tools can help cut off complaints before they form. Examples are charts that show the price of your products over time compared to other products people buy, a chart highlighting how government regulation has affected the price of equipment and service (e.g., 13 SEER mandate, refrigerant phase out, etc.), highlighting how prices vary for other products and services, stressing the fact you get what you pay for, and so on.

Paying For Complaints

Price complaints and disputes are a fact of life. They are a cost of business. As such, the cost of resolution should be built into overhead. Make sure the money is there, already allocated. Create a separate reserve account if necessary. As long as the cost of resolution is covered in overhead, why worry about it? Take care of it and move on to something more productive, like growing your business.

Oh, and be sure to fire the customer if he is unreasonable. Put him on your do not serve list so that you never need repeat the experience (at least, not with the same customer).

This was excerpted from Matt Michel’s book, The Power of Positive Pricing, available for $28.95 from the Service Roundtable online store (Roundtable Rewards members receive a $5 rebate on the purchase of this book). Click HERE for Part 1.